You know things are going from bad to worse when companies are even cutting back on mice, but that's just what's happening. The Swiss based Logitech (NASDAQ: LOGI), maker of computer mice and other peripherals, has announced that it will be reducing its workforce of 9000 employees by about 5% globally. The cuts, they said, would be concentrated in marketing, sales, legal, and information technology and would total about 500 lost jobs. Technically, then, they are not losing any mice makers, but some of the legal staff will be let go.
The cost-cutting measures were made necessary by what has been a dismal holiday selling season, not only for Logitech, but for nearly all manufacturers of retail goods, with luxury and big ticket items being particularly hard hit. Although the products that Logitech makes with the exception of some of their computer speaker systems are generally quite inexpensive, they unfortunately, are usually tied to a computer sale, most often a higher end gaming system. So it is difficult to say whether Logitech's sales troubles indicate retail weakness spreading to lower priced items at this point.
Like many exchange listed firms, Logitech offers stock market analysts guidance or estimates of their future earnings and revenue. With the announcement of the job cuts, however, Logitech also gave notice that their previous guidance should be ignored due to deteriorating business conditions. The company declined to offer revised guidance. That's never a good sign.
CEO Gerald Quinlan told analysts, "We expect the economic environment to worsen in the coming months and we are, therefore, taking significant actions to align our cost structure with what is likely to be an extended downturn." He went on to note that although Logitech sales took a sharp nosedive in the fourth quarter, the company did not lose market share. In other words, expect other makers of computer peripherals to report troubles at least as bad as those affecting Logitech.
While Logitech has a strong financial position heading into this downturn, the company's shares should be viewed with extreme caution until they provide some more specific information about the size of their sales decline and some estimation of forward expectations. Third quarter results are due on January 20th and Logitech has promised that it will give further details of the latest sales figures at that time.
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